Net income is a firm's profit for a period. The growth rate of net income is how much the net income changes from one period to another. The period can be months, years or any other period of time. Managers should view growth rate of net income to determine if their firm is growing at a sustainable rate.
Subtract the previous period's net income from the net income of the current period. Firms disclose net income on their income statement. Companies compute basic net income as revenues minus expenses. For example a firm had net income last month of $1,000 and net income this month of $1,400. $1,400 minus $1,000 equals $400.
Divide the difference in net income between periods by the previous period's net income. In the example, $400 divided by $1,000, which equals 0.4.
Multiply the number calculated in Step 2 by 100 to calculate the net income growth rate. In the example 0.4 times 100, which equals 40 percent.
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